Smart Reasons to Save, Use and Invest Money

Do Blogs or Dividends Pay Better Returns?

As I am planning my escape from my day job, I am working hard to build up passive income streams. Two of my planned income streams will be money from blogging and dividend investments. Money Reasons often covers the idea of using dividends to pay for everyday expenses, so I couldn’t think of a better topic than to examine whether it would be better for someone to invest in creating blogs than to invest in a high paying dividend stock. Overall, I like his idea of using dividends to pay for certain things in life, but I thought I would give it a closer look to see how it compares to blogging.

What kind of return can you expect with a blog?

In order to compare the two investments of managing a blog and dividend investments, we first have to level the playing field. Blogging, as anyone who has done it knows, takes time. Lots of it, in fact. So, in order to make it comparable, we are going to assume that I am creating a personal finance blog and hiring out all the services it takes to effectively run that blog. I will allow 2 hours a week to manage it because I would assume that someone spends that much time looking at or researching dividend investments. That may be a high estimation, but I don’t think it’s that much of a stretch. Estimating the costs this way will help me compare the two investments.

In order to make a blog financially successful, most people say that it takes 6 to 12 months to build up a blog to where it is earning a decent income. For the sake of being conservative in my figure, I will go along with the idea that a blog needs to be in existence for 12 months before it is making a decent profit. Considering that my latest passive income report shows that I am already making $700 each month (primarily from one blog) after 3 months, I don’t think it is out of the question to assume that one could make $1,000 each month from a blog that has been around for 1 year. Before we calculate the return, we first need to figure out our total financial investment to build it up to that $1,000 mark.

Expenses

Here’s a look at what the expenses might look to build up a blog that would be earning $1,000 each month:

Start up Costs:

Domain Registration and Privacy: $20
Web Hosting: $80
Logo: $75

Total Start-Up Costs: $175

Content/Writing:

$20 per article
x  156 articles for the year (posting 5 articles on the site every two weeks with an additional guest post elsewhere every other week)

Total Content/Writing Costs: $3120

Networking:

Carnival Submissions – $20 per month ($240 total)
Commenting – $20 per month ($240) [this is just an estimate]
Social Networking (facebook/twitter/fwisp/etc.) – $20 per month ($240) [this is just an estimate]

Total Networking Costs: $720

Total 1 Year Costs: $4015

While some of these figures are estimates, I believe I could build up a reputable site without investing too much time for $4015. Again, while I try to avoid paying any costs to hire anyone to do these things, I had to put it on an equal playing field. So, what does all of this mean?

If we were looking at a two-year window and assuming that at months 12-24, the site made $1000 on average each month, what kind of return would we be looking at? Well, with two years of maintaining the site, the total expenses would be at around $8,000. Yet, your total income would be $12,000 (and that’s not even counting the few months in the 6-12 month period that would be in the hundreds). If you were to invest this all upfront, you would be looking at an estimated return rate of 50% over the two years, or an estimated annual return rate of approximately 22%.

To make a long argument short, if you can find a dividend stock beats a 22% annual return, sign me up. I will admit that I am new to investing in dividend stocks, but it doesn’t take a genius to see that you won’t make that kind of return in any traditional dividend-paying investment. The only down side is that I am not sure how long making money online will last. I suspect it will last another 5-10 years, but who can say that it will last 20 or 30? It may be a short-term investment, but it seems like a darn good one, if you ask me.

What do you think? Would you rather manage a blog or purchase dividend stocks?

This was a guest post from Corey at Passive Income to Retire, where he is tracking his progress to retire by the age of 27.

MR here, I like this comparison, but I really view each form of income generation as part of the same team.  Dividends from Stocks, being the more purer form of passive income.  Blogging for me takes a lot of time and energy, so I don’t really believe it’s passive income for me, at least not yet.  Dividends on the other hand are a buy it once, check it quarterly and that’s it… kind of passive income stream.

Thanks Corey for the interesting angle on passive income.

MR

 

32 Responses to Do Blogs or Dividends Pay Better Returns?

  1. Corey makes a great argument for outsourcing all of the activities of a blog and overseeing the process with a minimal amount of personal time. If you have the upfront $4000 to do so, then it seems like a no brainer.

    It would take $120,000 of capital returning 10% a year to generate $1000 in revenue per month.

  2. I would agree that keeping up a blog is definitely not passive income. I think it may be a stretch to say that everyone can easily make a successful blog in a year. I wish that were true!

    • Yes, I don’t think everyone can do it. It takes a lot of dedication and some basic skill set (like writing relevant and interesting material, etc.). But, I think you would be surprised to see how many people could do it.

  3. I think any investment takes risk and an initial cost. Nothing comes for free or without hard work. To me, stocks and blogs are the same. You still have an upfront cost and it takes time to built wealth with them. Great post Corey. Interesting stance.

  4. Not everyone can create a successful blog even with outsourcing. Sure you’ll definately going to make money, it’s definately not going to be passive. Dividends on the other hand requires you to deposit money into your brokerage and buy or sell. People likes simple(Not us bloggers) and there’s nothing simpler than clicking on your mouse a couple times each month and collect divys.

  5. I see blogging as a more active income because you have to constantly keep at it to build it up. I prefer creating niche sites that do not have to be maintained. Once they reach a certain level you can pretty much leave them. That seems more passive to me.

  6. For my part, I’m probably a better investor than a blogger. It’s been a learning experience I went into this area because I needed a creative outlet for my ideas.

    BTW, you can earn 20%/year with individual stocks (not necessarily your portfolio unless you want it concentrated), there are strategies.

    Though, I would give this about the same likelihood of success as making money with a blog. No risk no reward.

  7. That’s an interesting way to look at it. The problem I see is there are tons of unsuccessful blogs. Can a blog be successful if we hire out content creation? I’m for hiring out everything else, but I doubt hiring content creation will lead to a successful blog.

    I could be wrong though and would love to hear some success stories.

    • I know what you mean and I agree. I know that personally I go to certain blogs for the blogger’s way of writing and thinking. Some that have become less of a voice on their site has drove me away. It must be a delicate balance…

  8. Hmmm…. really interesting take on blogging. I have to admit, I never really sought to monetize my blog before. Well, I knew it’s a possibility and relatively “real” but I’ve used mine more as an outlet. Maybe I’ll have to focus on monetizing it for 2012. I’m not sure about hiring someone though. Like MR says, I’d like to think my “voice” is what attracts people to my site. That being said, maybe it’s not…. Lots to think about.

    If you happen to check it out, let me know if my “voice” stinks…. maybe I’ll have to outsource a few posts here and there – probably not until I start to get ready to monetize.

  9. I agree with RB40- there are probably only 1% of blogs that make it to that level of income.

    Also, do you not think that outsourcing your content/ writing would detract visitors away from your blog?

  10. Awesome calculation. Like it very much.

    From the viewpoint of practically stable income I prefer to go for dividend.

    As blogging is just an hobby which helps you to build extra suppot of income with out interested talent.

  11. I think this post makes launching a blog and monetizing it sound too easy which is not true in my opinion.

    Outsourcing content might not be a mark of quality and it will show in your posts if you’re blogging about a specific niche. Sometimes it’s the person’s passion for a subject that makes or breaks a blog.

  12. Just playing devils advocate here but McDonald’s stock had about a 56% return over the last 2 years (29% this year) not including dividends. And has a healthy 2.9% yield currently.

    Good post, though I’d definitely consider the blog a business once the income starts flowing which could offer more life changing opportunities long term.

  13. i like the attempt to compare here, but really it’s comparing apples to duck eggs. a few things i’d like to highlight . . .

    1) start up costs appear too high. one can certainly “succeed” more cost efficiently

    2) blogging is not passive by any means – establishing niche sites are. this is critical to understand. the sooner the better

    3) blogging takes a lot of planned and targeted time commitment

    4) blogging is not a guaranteed way to make money. most never see anything from their efforts

  14. Blogs are soooooo much better for return. Average div / risk free + premium rate of return might only be around 2-4% nowadays.

    Great thing is, momentum really builds in blogging after a while!

    Sam

  15. Energy & Oil technology companies that are raising dividends is a great way to invest on market pullbacks. Here are 3 solid companies raising dividends in January 2012 including Schlumberger, Enterprise Products Partners and Alliant Energy. http://www.bestdividend-paying-stocks.com/dividend-raising-companies-jan2012.html I especially like Schlumberger which is an oil technology diversified play and has return 197% in the last 10 years, just amazing! Enterprise Products Partners has also returned almost 90% in the last 10 years with a solid 5% dividend, I think this is a dividend investor’s goldmine!